The fallout from Brock Lesnar’s potential drug violation

July 18, 2016

On Friday, Brock Lesnar was flagged by the United States Anti-Doping Association (USADA) of a potential violation of the UFC anti-doping policy due to an out of competition test from June 28, 2016.  Although testing results of Lesnar’s “B” sample are yet to be revealed, the fallout from Lesnar’s appearance hurts the UFC and possibly the WWE.

On June 5, 2016, it was announced that Lesnar would fight at UFC 200 on July 9, 2016.  The signing was unprecedented because he was under contract with the WWE.  Yet, the WWE granted Lesnar the chance to fight in the Octagon once again.  Despite the fact that the WWE has its own drug testing policy (known as the Wellness Policy – Lesnar has never been flagged for a violation), Lesnar was tested by USADA eight times in just the month lead-up to his fight against Mark Hunt.  He took 5 tests in the first two weeks after it was announced he was returning.  Multiple tests came up clean.

Despite the tests, the UFC policy handled by USADA dictated that a returning athlete to the UFC most give the company four months written notice so that USADA can put the athlete in the pool of those it may selectively test.  But, the UFC anti-doping policy allows an exemption for a returning athlete that may be subject to drug testing.  Per 5.7.1 of the UFC anti-doping policy:

An Athlete who gives notice of retirement to UFC, or has otherwise ceased to have a contractual relationship with UFC, may not resume competing in UFC Bouts until he/she has given UFC written notice of his/her intent to resume competing and has made him/herself available for Testing for a period of four months before returning to competition. UFC may grant an exemption to the four-month written notice rule in exceptional circumstances or where the strict application of that rule would be manifestly unfair to an Athlete.

The key sentence here is the last sentence:  “UFC may grant an exemption to the four-month written notice rule in exceptional circumstances or where the strict application of that rule would be manifestly unfair to an Athlete.”

Since the UFC Anti-Doping Policy did not begin until July 1, 2015 and Lesnar’s last fight in the UFC prior to UFC 200 was December 2011, he was considered a new athlete.  There has not been an official statement as to whether the UFC granted the 4-month exemption due to an “exceptional circumstance” or if it was “manifestly unfair to an Athlete.”  Of course, either waiver could be easily explained.

But, one has to think that Lesnar and the UFC had contemplated his return as he had been training prior to the June announcement of his return to the Octagon.  One might suggest that Lesnar could have notified the UFC of his return in the requisite 4 months to allow for the proper testing to occur.

However, it would seem that the parties wanted the Lesnar announcement to be a surprise.  Recall, that Ariel Helwani and others from MMA Fighting were thrown out of a UFC event and Helwani was banned for life due to his report of Lesnar’s return prior to the UFC’s opportunity to make it themselves.  Helwani along with his colleagues were reinstated a couple days later.

Notwithstanding the notice issue, let’s take a look at what Lesnar could face as a result of testing positive for a banned substance.  First, Lesnar’s “B” sample, a second sample taken to determine the validity of the finding in the first sample, must confirm the initial finding of a banned substance.  If this happens, Lesnar will face discipline from Nevada and the UFC per the anti-doping policy.

Since the infraction took place in Nevada, Lesnar will have to appear before the Nevada State Athletic Commission to address the drug test failure.  At that time, we should know what drug(s) Lesnar tested positive for in his out-of-competition sample.  In 2015, Nevada adopted guidelines for combat sports which included a 36-month suspension and 50-75% of the purse for a first-time offender for someone taking anabolic steroids.

In addition, the UFC anti-doping policy would discipline Lesnar.

Under Section 10 for Sanctions on Individuals, Section 10.1 specifically states:

An Anti-Doping Policy Violation occurring during, or in connection with, a Bout may, upon the decision of UFC, lead to Disqualification of all of the Athlete’s results obtained in that Bout with all Consequences, including, without limitation, forfeiture of title, ranking, purse or other compensation, except as provided in Article 10.1.1.

Read broadly, under the UFC-USADA Anti-Doping Guidelines, Lesnar could have his purse for the bout and “other compensation” taken from him.  It would hurt enough that Lesnar would lose out on his $2.5 million reported purse but “other compensation” could mean money he makes from his PPV “upside.”

Not only could that happen, but the section further states that UFC could fine Lesnar up to $500,000 per Section 10.10 of the UFC-USADA Anti-Doping Guidelines.  In addition, he could have his win against Mark Hunt overturned to a no decision per discretion of the Nevada State Athletic Commission according to section 467.850.  This would not sting as much since Lesnar did not have a win bonus to forfeit.  Regardless, he still could have a substantial amount of money taken away.

The monetary fine would be the hardest penalty for Lesnar.  The $2.5 million is the largest reported payout for a UFC fighter in its history.  But, Lesnar was going to make more from his PPV guarantee.  It is being reported that the UFC 200 PPV drew 1.1 to 1.2 million PPV buys.  In most markets, the PPV for UFC 200 was $59.99 HD and $49.99 SD.  Lesnar was projected to make $3-5 million in addition to his $2.5 million.

Mark Hunt, Lesnar’s opponent has demanded that he receive half of Lesnar’s $2.5 million or else he is requesting his release from his UFC contract.  Hunt, who made $700,000 for taking on Lesnar, will be disappointed to learn that under the UFC-USADA guidelines, any money forfeited by an athlete would be under the UFC’s discretion “to be applied to offset the costs of the Program or given to anti-doping research.”

The UFC could also fine Lesnar pursuant to its Code of Conduct which imposes discipline based on misconduct.  Under its Code, “misconduct” may include, “Conduct that undermines or puts at risk the integrity and reputation of the UFC.”  A violation of its drug program could fall under this.

There is precedent for a fine as Jon Jones was docked $25,000 for failing a drug test in December 2014.  Of course, Jones’ drug test failure was for cocaine use.  We note that the detection of this drug was done out of competition and should have not been tested for according to the rules.

Lesnar’s only statement related to Friday’s news of his potential violation was a vague “we’ll get to the bottom of this.”

The WWE does not seem to be concerned with the potential violation and has indicated his next appearance will be at its big event Summerslam, August 21st.  They have not addressed the potential violation.  From its perspective, its an MMA matter, that a WWE matter.

However, the question looms as to whether a Nevada State Athletic Commission suspension would affect his wrestling career.  Some state athletic commissions oversee professional wrestling.  Most commissions honor suspensions of an athlete in other states.  Would a suspension in combat sports carry over to professional wrestling?  We will see.

Show Money Episode 11 talks about the UFC sale

July 17, 2016

I hopped on with Paul Gift and John Nash of Bloody Elbow to discuss the UFC sale and the future impact.  We also learned at the end of the episode that Brock Lesnar was flagged for a potential UFC anti-doping policy violation.

Boxers spar in court over failed bout agreement

June 26, 2016

Although Deontay Wilder is scheduled to fight Chris Arreola on Fox next month, he’s embroiled in a court battle against Alexander Povetkin and his promoter, Andrey Ryabinskiy due to a purported failed drug test which scratched the fight between the two.

On June 13, 2016, Wilder filed a lawsuit against Povetkin, Ryabinskiy and World of Boxing, LLC (“WOB”) for breach of contract and seeking the court for a declaratory judgment.  In addition to the money that has been put up in escrow for the fight

10 days later, World of Boxing, Povetkin and Ryabinkiy (“WOB”) filed sued against Wilder, Lou DiBella and DiBella Entertainment, Wilder’s promoters.  WOB is filing claiming causes of action for breach of contract as well as defamation.

Both lawsuits were filed in the U.S. District for the Southern District of New York.

Wilder and DiBella Entertainment, Inc. v. World of Boxing, LLC and Alexander Povetkin

The lawsuit claims breach of contract against WOB and Povetkin.

The facts, as told by Wilder’s attorney are below.  Also added, are additional facts from the WOB lawsuit which we identify as well.

  • The World Boxing Council (“WBC”) ordered Wilder and Povetkin (as the mandatory challenger) to begin negotiations for Wilder’s mandatory title defense of his WBC World Heavyweight Championship.
  • No agreement could be made and a purse bid was ordered. WOB won the purse bid at a price of $7.15M.  Notably, the WOB lawsuit claims DiBella’s bid was for $5.1M.
  • The agreed payout would include 10% of the amount bid ($715K) to the winner as a bonus and then a 70-30 split thereafter. But, the parties still had to negotiate other parts of the fight including drug testing.  The amount would also cover a 3% WBC sanction fee.
  • According to the WOB lawsuit, Wilder would receive $4,504,500, Povetkin $1,930,500 and the winner would receive $715,000.
  • Wilder’s side wanted to institute a drug program conducted by the Voluntary Anti-Doping Association (“VADA”).
  • Negotiations continued but suspicions by Wilder’s camp about Povetkin’s use of performance enhancing drugs increased.
  • With the parties at an impasse, the WBC stepped in and instituted an agreement on April 6, 2016. In the agreement, the drug testing program included VADA testing under the “WBC Clean Boxing Program.”
  • Since WOB won the purse bid, the fight was to take place in Moscow, Russia on May 21, 2016.
  • An agreement was signed on April 11, 2016. A copy is attached to the Wilder Complaint and is below.
  • On April 19, 2016 an Escrow Agreement was entered into in which $4,369,365 was put into an Escrow (identified as Chicago Title in the WOB lawsuit). The Escrow Agreement contained a (confidential per Wilder’s attorneys) liquidated damages provision.
  • Povetkin tested positive for Meldonium in an April 27, 2016 test.
  • The WBC issued a ruling that the fight would not take place as scheduled.
  • Wilder’s side advised the Escrow Agent not to disburse any of the money in escrow until it received a “joint instruction from the parties or a non-appealable order from a court of competent jurisdiction.”

Word of Boxing, LLC, et al. v. Deontay Wilder, et al.

The WOB lawsuit mitigates the finding that Povetkin tested positive for Meldonium.  This substance was the same one that tennis star Maria Sharapova tested positive for and has received a two-year ban from the International Tennis Federation.  In the UFC, Islam Makhachev tested positive for Meldonium and was pulled from the UFC on Fox 19 card.  The ban on Meldonium was instituted by the World Anti-Doping Agency (“WADA”) on January 1, 2016.  It was added to the list of banned substances and notice was given to athletes three months earlier in September 2015.

However, earlier this year, WADA acknowledged that there was a lack of clear scientific information on excretion times.  Thus, this new revelation may actually overturn certain notices of infraction.  In fact, this was noted by WOB’s attorneys in its lawsuit.

It argues that Meldonium found in Povetkin’s sample were traces and could not impact an athlete’s performance.  It should be noted that both “A” and “B” samples found Meldonium.  Povetkin admits to using Meldonim in 2015, prior to its ban.  But, the facts reflect that he had a negative sample in April 7 and 8, 2016 but then tested positive in an April 27, 2016 sample.

WOB’s breach of contract claim cites that Wilder did not allow the WBC, the governing body for this fight, make a determination on the Povetkin drug test.  Rather, Wilder and his promotion decided not to participate which WOB claims as the breach.

It also cites a breach of the escrow agreement with respect to the monies lodged in an Escrow Account which was to pay for the purses.  WOB claims that since the bout did not occur, it should receive its money back from the trust but Wilder has “taken actions to prevent Chicago Trust from releasing such funds…including through a letter directing Chicago Trust to refrain from disbursing the Escrow Property to World of Boxing.

The defamation claim is rather unique as it claims Wilder and his promotion arm instituted a “Smear Campaign” against Povetkin.  The WOB Complaint lists multiple news reports where it claims Lou DiBella and his promotion provided the outlets with false statements.  WOB claims Povetkin did not cheat or lie and the “trace amounts” in Povetkin’s April 27, 2016 sample do not support the fact that he attempted to do so per the WOB lawsuit.  WOB claims the statements were made to avoid their contractual obligation of Wilder having to fight in Moscow, Russia.

WOB is seeking $34.5M in its lawsuit.  It is looking for the $4,369,365.000 in the Escrow Account and its defamation claim seeks $10 million.

Bout Agreement

Payout Perspective:

Leave it to boxing to provide us with some of the more unique contractual legal issues in the sport.  There is an issue of who breached the contract between the parties.  Should Wilder have a claim due to the positive drug test from Povetkin?  Or, does Povetkin side have an argument against Wilder for not following the WBC procedures?  One has to think that Povetkin has a right to appeal the VADA ruling especially with the uncertainty of Meldonium.  But, we see that the contentious negotiations between the parties have now spilled over into the courts.  Wilder has found another fight in lieu of Povetkin.  But, does Povetkin have a claim against Wilder for blocking funds to be returned to them in Escrow?  It’s clear there is a liquidated damages provision in the Escrow Agreement of $2.5 million as both sides seek that it damages.

MMA Payout will keep you posted.

Company refutes UFC has been sold

June 21, 2016

MMA Junkie reports that Zuffa has sent an email to its employees refuting the story that the UFC has been sold.  Dave Sholler has made an official statement denying the report from FloCombat that the company has been purchased.

Sholler told MMA Junkie that, “FloCombat.com’s report indicating that the UFC has been sold is false.”

An internal email sent to Zuffa employees was obtained by Junkie addressing the rumors and report of the sale.  “A report today by FloComat.com indicating that the company has been sold is false,” read the email obtained by Junkie.  It went on to state that the company’s attorneys would “investigate and take all appropriate legal actions against the parties publishing and contributing to these false stories.”

The report stated that Zuffa had accepted a bid for $4.2 billion to sell the UFC.  No formal announcement has come forth despite the news that 4 entities had submitted bids to purchase the company late last week.

Payout Perspective:

This is semantics but it seems that the internal email refutes that the UFC has been sold.  The question is whether it will be sold.  The company has to cover itself at this point since the concern is that anything could unravel the deal (if the news is accurate).  The internal email and public denial is to ensure employees that their positions are secure.  As for whether lawyers for the UFC will come in to file a lawsuit against the alleged “false” report seems to be posturing on the part of the company.  Defamation would seemingly be the only claim the company might have although we do not have all of the facts at this point.

Muhammad Ali Expansion Act revealed

June 17, 2016

The initial draft language for the Muhammad Ali Expansion Act was made public last week.  The language, while likely not the final version, amends the existing act which protects boxers.

The UFC opposes federal regulation of its sport.  Lawrence Epstein, the company’s Chief Operating Officer told ESPN, “We continue to believe the federal government would have no productive role in regulating MMA promotions or competitions.”  This is not the first time the company has lobbied against regulation.  According to Fox Sports.com, Zuffa hired lobbyists to help them oppose Senator John McCain’s proposed amendments to the Ali Act.

Officially the Professional Boxing Safety Act of 1996 amends the Muhammad Ali Act.  It was referred to the Committee on Education and the Workforce and the Committee on Energy and Commerce in late May.

Muhammad Ali Expansion Act by JASONCRUZ206

Payout Perspective:

The language essentially expands the current law to include combat sports.  The language and sections are changed but there is nothing wholly different from the existing law other than combat sports are now a part of the proposed law.  Certainly, the expansion of the Ali Act could cause the UFC, Bellator and other organizations to change its business practices to ensure that it is in compliance with the law.  However, the utility of the law has proven to be a difficult obstacle for fighters that have sued under the Ali Act.

The UFC has retained a lobbying firm to oppose the regulation.  A letter to the committees which will evaluate the proposed law, signed by mainly Republican-backed groups, has been circulating opposing the expansion.  On the other end, MMAFA has released a letter in support of the law.  The letter is signed by many fighters in support of the bill.

Jury hits Canelo with $8.5 million verdict

June 14, 2016

Saul “Canelo” Alvarez will have to pay $8.5 million to his former promoter, All-Star Boxing for unjust enrichment after a trial in Miami-Dade County.  Although Golden Boy Promotions was sued in the lawsuit, the jury did not assess a verdict against it.  However, per the LA Times, it stated that Alvarez will appeal the verdict.

All-Star Boxing owner Felix “Tuto” Zabala, Jr. stated that he did it for the dignity of his business and that “[y]ou must respect contracts.”  Zabala claimed that Alvarez breached a contract in which he had 3 more years left when he signed with Golden Boy.  The promotion also claimed unjust enrichment on the part of Alvarez which eventually was the reason the jury awarded the amount.

Golden Boy was sued for tortious interference with a contract.

Per BoxingScene.com, Alvarez claimed that the contract he signed with All-Star Boxing was in English and the terms to him were unclear.

The verdict ends, for now, a lawsuit that was filed in 2011.  All-Star Boxing offered to settle the lawsuit for $5 million but that was rejected by Golden Boy.

Golden Boy issued a statement that despite Canelo’s verdict, All-Star Boxing will have to pay attorney fees for Golden Boy.  This is due to the fact the jury found no contract between Alvarez and Golden Boy per a Golden Boy spokesperson.  Presumably, since the jury did not find any wrongdoing on the part of Golden Boy, All-Star Boxing must pay for the promotion’s attorney’s fees.  All-Star Boxing refutes this claim.

Payout Perspective:

As the LA Times points out, even though Canelo was assessed the verdict, it is not clear whether the fighter added an indemnification clause in his contract which would have the promotion cover expenses in legal matters.  This would probably be the reason why Golden Boy will likely appeal the judgment.  The fact pattern as it seems is an example of the reasons why the Muhammad Ali Act is in place: a dispute over a prolonged contractual obligation, a claim that a promotional agreement was signed under duress and a breach of contract.  Although this part of the dispute may be over, we will likely see an appeal.

UFC hires Farragut Partners to address Ali Act expansion

June 11, 2016

According to a PR industry web site O’Dwyer’s PR, the UFC has retained a Washington D.C. lobbying firm Farragut Partners to combat the expansion of the Muhammad Ali Act.

The D.C. based firm was formed this year.  They are an offshoot of partners from another firm.  They have a list of clients in the telecommunications, energy and healthcare industries.  Earlier this year, T-Mobile chose the firm to help it push support for the “Wireless Tax Fairness Act.”  The bill would enact a five-year moratorium on any new state or local taxes imposed on consumers for wireless service.

The firm also represents Comcast Corp., Altria Group (Tobacco Industry) and Blue Cross/Blue Shield according to opensecrets.org.  Thus far this year, it has reported $950,000 in lobbying income.

Oklahoma Congressman Markwayne Mullin introduced the bill late last month.

The bill would introduce measures to expand the Ali Act protecting boxers to all pro combat sports athletes.

A three-person team at Farragut Partners will handle the UFC account including federal legislative staffers for Republican politicians.

Payout Perspective:

Clearly, the UFC opposes federal regulation of MMA and specifically its business practices.  It should not surprise anyone that it has hired a lobbying firm to represent its interests and gain support in opposing the expansion of the Ali Act.  This year it has already spent $110,000 on lobbying firms.  Last year it spent $410,000.  Look for the total for this year to increase due to the Ali Act lobbying efforts.  We shall see if it is money well-spent for the company.

Gawker files for Chapter 11

June 11, 2016

Gawker announced that it was filing for Chapter 11 Bankruptcy on Friday as a result of the $140 million jury verdict assessed by a Florida jury in the Hulk Hogan invasion of privacy lawsuit.  A Florida judge upheld the verdict by denying a motion for new trial or reducing the monetary judgment by Gawker attorneys late last month.

According to the Wall Street Journal, the company will sell its assets in bankruptcy court and has received an opening bid of $90 million from Ziff Davis.  The offer is though to set a “floor” for the bidding.

The bankruptcy filing halts any attempt for Hogan’s attorneys to realize the $140 million judgment by conceivably taking control of the company.  Under bankruptcy protection, Gawker can continue to operate while raising money for appeals.

Payout Perspective:

Bankruptcy seemed like the only option for Gawker, the owners of Deadspin, Gizmodo and other popular sites.  It appeared that during the trial, the judge indicated that any verdict should not bankrupt the company.  Apparently, this was not the case.  Chapter 11 is a form of bankruptcy taken on mostly by companies in extreme debt that may (or may not) reorganize in order to operate once again.  For a recent example, sporting goods retailer The Sports Authority filed for Chapter 11 in March and is liquidating assets and closing stores in order to pay off debt.  In the Gawker case, it does not look like Gawker in its current form will reemerge from Chapter 11.  Rather, another media company will acquire the assets including Deadspin, et al.  Thus, we haven’t seen the end of the actual web site companies.  Of course, if Gawker prevails on appeal, we may see Nick Denton and A.J. Daulerio once again.

Showtime sues Top Rank for Pacquiao lawsuits

May 29, 2016

Showtime Networks, Inc. has filed a lawsuit in the U.S. District Court of New York against Top Rank, Inc. citing indemnification and breach of contract related to lawsuits filed by third parties against Showtime and Top Rank stemming from Manny Pacquiao’s claim that he fought with an injury against Floyd Mayweather, Jr.

The lawsuits, filed by individuals who purchased the PPV claimed that Pacquiao was not ready to participate in the fight because of an injury in early April 2015 and it was not disclosed.  Most of the lawsuits point to the Pre-Fight Medical Questionnaire provided by Pacquiao which seemingly misrepresented the injury by not disclosing it.

Under the terms of an agreement between Showtime and Top Rank, Top Rank was to defend and indemnify Showtime from any liability (i.e., lawsuits) and supply Showtime with its own legal counsel.  Showtime’s attorneys point out that a potential conflict occurred when Pacquiao did not notify officials of a shoulder injury prior to the Mayweather fight.  According to the lawsuit, Showtime demanded that Top Rank pay for Showtime’s legal representations once these lawsuits were filed due to the potential conflict.  Top Rank claimed that the terms of the agreement which would trigger Top Rank to defend and indemnify Showtime would be an instance of actual conflict between the parties.  Per the lawsuit, Showtime claims that Top Rank did not believe that there was a conflict.

The relevant indemnification language of the Showtime/Top Rank contract is below:

Showtime also claims that Top Rank threatened to assert its own indemnity claims against Showtime.  Top Rank claimed that Showtime promotional materials for the fight were relevant in relation to claims of breach of contract filed by plaintiffs.  Thus, Top Rank requested the same defend and indemnification that Showtime had been of Top Rank.

Despite the refusal to pay for its attorneys, Showtime defended the lawsuits it was named in.  The legal fees through May 12, per the lawsuit is $682,754.06 plus interest.  Showtime seeks to recoup this plus fees and costs of the lawsuit in this action.

Payout Perspective:

It’s clear that this was bound to happen.  Once Pacquiao claimed the injury post-fight, the lawsuits started to pour in from plaintiffs’ attorneys and they were going to name any and all entities in its complaints.  The lawsuit presents the question of what is a conflict and what is not and when the right to indemnify and defend took place.  Showtime claims that the unreported injury should have triggered the indemnification in the contract while Top Rank will likely deny this citing no conflict at the time.

We will keep you updated.

Amendment to Ali Act introduced on Thursday

May 28, 2016

The much-anticipated bill seeking to amend the Muhammad Ali Boxing Reform Act was introduced by Oklahoma congressman Markwayne Mullin this past Thursday.

No text of the act which would amend the current law is available for the public but one would think that this should be available soon.  Democrat Joseph Kennedy is co-sponsoring the bill.  Thus, there is bi-partisan support for the bill as Mullin is a Repbulican.

The congressman is a former MMA fighter and is in support of legislation to protect all combat sport athletes.  Information about the amendment language has been vague.

Despite the intent of the Ali Act, there are issues with the law and its enforcement.

Payout Perspective:

This will be an interesting piece of legislation to track as it makes its way through committee.  While I think the intent is there, the details of the amendments will be the most interesting thing.  The UFC would oppose this Act and despite Bellator advocating for this, allegations in a recent lawsuit against the Viacom-owned company may say otherwise about its business dealings.

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